In a regulatory environment that is already reshaping how brokers operate, the question of who oversees the overseer matters more than it might appear
An influential group of peers moved yesterday to put the government on notice. Baroness Noakes, writing in her capacity as chair of the Lords' Financial Services Regulation Committee, told investment minister Lord Stockwood that the Financial Services and Markets Bill had "eliminated" what she called an "integral" part of the UK's regulatory accountability system.
The specific change she is objecting to is significant. The Financial Conduct Authority and Prudential Regulation Authority have, under existing law, been required to explain their actions to Parliamentary committees. The new bill removes that requirement. In Baroness Noakes's words, it "renders the committee's work ineffective" - and while she acknowledged it "may not have been the government's intention", she made clear it is, nonetheless, the result.
The bill, which has passed its first two readings in the Lords and is now at committee stage, is the centrepiece of Rachel Reeves's push to "regulate for growth." The government's ambition - that the FCA and PRA should become more agile, more innovation-friendly, less encumbered by process - is one that has received broad support from across the financial services industry, including from mortgage brokers who have long called for a more proportionate regulatory approach. The Lords' committee itself has repeatedly pressed the FCA and PRA for more urgency, previously scolding them for lacking a "clear understanding of the cumulative burden of regulation."
But there is a difference between deregulation and deaccountability. The peers' objection is not that the FCA should be constrained from acting - it is that when it acts, someone in Parliament should be in a position to ask whether it acted well.
Why this matters now specifically
The timing is not incidental. The FCA is currently operating on a broad and consequential mortgage regulatory agenda, including an active consultation pipeline on mortgage rule changes, supervisory work on borrowers in financial difficulty, and - most significantly for brokers - proposals that the Association of Mortgage Intermediaries has warned risk marginalising the role of mortgage advisers under the banner of simplification.
It also handed ministers a new "statutory power" to give regulators strategic steering - allowing the government to define, in the regulator's own operating context, "what growth means." The combination of expanded ministerial power over regulatory direction and reduced Parliamentary scrutiny of regulatory conduct creates a gap that Baroness Noakes and her colleagues are, not unreasonably, pointing at.
As the Lords debate in the Hansard record of 8 June noted, the regulators are "masters of the art of wordsmithing documents to make them attack-proof." Parliamentary select committees, the argument ran, are already fighting an uphill battle to hold the FCA and PRA to account. This bill makes that battle harder.
For mortgage brokers, the practical consequence is not immediate but it is worth naming. The FCA sets the rules under which intermediaries operate, prices the risk of non-compliance, and decides the scope of what "good consumer outcomes" requires. The Consumer Duty - which places substantial and ongoing obligations on every mortgage firm in the country - was developed, consulted upon, and implemented by the FCA. If the FCA's decisions on rule-making, supervision and enforcement are less subject to Parliamentary scrutiny than before, the regulated community has fewer external checks on whether those decisions are proportionate, well-evidenced, and consistently applied.
That is not an argument against the growth agenda. It is an argument that growth and accountability are not in tension - and that a regulator given greater power and less oversight is a different proposition from a regulator given greater power and the same oversight.
The Treasury has been contacted for comment, according to the original City AM report. The committee has called for discussions with the government before the bill progresses further. Whether ministers engage substantively, or treat the peers' letter as an inconvenience to be managed, will tell the industry something useful about how seriously the accountability question is being taken.
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